Published 4:00 am, Sunday, September 9, 2007

The thought of receiving ads on a cell phone is enough to give some people spam-induced nightmares.

Indeed, two-thirds of respondents in a Telephia survey recently said they considered mobile ads to be unacceptable.

But a growing number of advertisers and content providers are undeterred: They believe they can make mobile advertising more palatable by serving it up with freebies and discounts for amenable cell phone users.

Virgin Mobile, for example, is offering free voice minutes to subscribers who interact with ads. Zagat, the restaurant survey book, is providing free ad-supported content on mobile devices. Fans of the NFL and Major League Baseball can get team and player alerts from 4INFO through free text messages accompanied by a small ad. And Hands-On Mobile will announce this week that it's releasing seven of its games on Greystripe's ad-funded mobile gaming portal, GameJump.

For consumers in this emerging environment, mobile advertising doesn't have to be an annoyance. Meanwhile, for advertisers, it's a way to actively engage customers with the potential for even higher response rates than on other platforms.

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The movement behind mobile advertising overall is just gaining momentum. It's expected to generate $895 million worldwide this year, though it is anticipated to grow to $14.6 billion in 2011, according to Gartner Inc.

While that's a small chunk of the overall advertising market, with almost 240 million cell phone subscribers in the country, the potential bounty for advertisers is inviting.

It's one reason Google is investing heavily in mobile, even considering releasing its own cellular phone packed with a Google operating system. If the rumors of the Google phone do pan out, observers said, the search company's free approach could help propel the mobile ad-supported model, and perhaps even lead to lower cellular bills.

"Almost all of Google's products have been ad-supported, and most of them have been elegantly implemented," said Roger Wood, general manager of the Americas region for Redwood City's Amobee, a mobile advertising company. "We think mobile should be no different. It should be a seamless experience."

Amobee is one of the early companies trying to bring about ad-funded content and services. The company works with cell phone carriers to offer free games that are accompanied by ads. Wood said that as it gains steam, the ad-supported model could extend to a wider array of content, including video and music.

Virgin Mobile has found success having its customers interact with advertising in exchange for free voice minutes. Users can go online to Virgin's Sugar Momma site and earn minutes for the time they spend viewing the interactive commercials there. Or, users can respond to text messages from Sugar Momma, with each text message worth 30 seconds of talk time.

Scott Kelliher, director of the mobile advertising group at Virgin Mobile, said 425,000 of Virgin's 4.8 million subscribers have used this setup to get free minutes. And the rate at which consumers click through to connect to a sponsor is 5.5 percent, he said, much higher than traditional Web ads. The key, Kelliher said, is clearly communicating to subscribers what they're getting.

"One of the reasons this has been an unqualified success is that users are very aware of what they're doing and why messages are coming to them," he said. "They go into the Sugar Momma area, and they know it's going to be all ads, so they're more receptive to what they find there."

Thet said the company has worked with content providers including the NFL, USA Today and Major League Baseball to provide free alerts and updates - but only when a customer signs up for them. He said 4INFO also works to find relevant ads to place at the end of the text. And sometimes, it doesn't include an ad at all.

"We really try to keep the user experience first," Thet said. "What we found is if mobile ads are not obtrusive, but interesting and relevant, people are willing to interact with ads."

Analysts said it's unlikely that all media content will become free on mobile phones. But some believe ad support could help drive media and Web consumption on phones, a process that has been slow compared with other countries. In the United States, about 166 million cell phone users send text messages, but only 35 million use the mobile Web and 12 million watch video on their phones, according to Telephia, a mobile research firm.

"To make some of these services truly a mass-market phenomena, instead of just for business or wealthy people, the prices have to come down," said Kanishka Agarwal, vice president of mobile media for Telephia. "Ad support could help drive more adoption."

Even companies that are doing well selling premium content are also dabbling with the ad-supported model.

Emeryville's MobiTV, which has a strong and growing base of 2 million subscribers for its live television packages, worked with Sony Music earlier this year to create an ad-supported mobile Internet site to promote artist Avril Lavigne's latest album. Jack Hallahan, vice president of marketing for MobiTV, said the company also is considering offering a handful of live channels for free with ad support, which he said could help widen MobiTV's base of users.

"That would be an opportunity to rapidly expand," he said. "If we want to entice more people to the service, this could be an interesting approach and a good acquisition tool."

Hands-On Mobile of San Francisco, one of the top mobile gaming companies, is betting ad support can do just that. The company is releasing seven of its games, including World Poker Tour Seven Card Stud and Top Gun, on GameJump, which inserts ads at the beginning and end of each game.

"Today, the number of people who play games is small piece of the total. We believe advertising will be a key component to mobile games, and we want to see how free or subsidized games and applications can increase distribution and get people involved," said Erik Pavelka, vice president of business development for Hands-On Mobile. "The key thing is giving people content that they want."

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